Upside Risks To Latin American Wheat Production

We see upside risks to our wheat production forecasts for both Argentina and Brazil for the upcoming 2014/15 harvest, as high prices encourage plantings. Compared with soybean and corn, wheat production is much lower in South America, but can still have a significant impact on regional food price inflation dynamics and the global wheat market. The improvement in production bolsters our view that the global wheat market will remain in surplus for the 2014/15 season, and we continue to forecast prices to average below spot levels.

We are forecasting an increase in the combined Brazil and Argentina wheat crop for the 2014/15 season, as high prices are encouraging plantings, and soil conditions in key growing areas are improving. In Brazil, we are forecasting a mild improvement to 4.8mn tonnes, but recent government estimates put the crop at 6.7mn tonnes, making it one of the largest ever. Paraná, one of the top wheat growing states, is expected to see a production increase of almost 25% according to local estimates. In Argentina, we are forecasting production to rebound to 12.1mn tonnes, largely due to better weather. Wheat production in Argentina could increase further as local sources hint that the government would waive its 23% export tax.

The improved production from Argentina should help the country recover from a 40-year low in exports for the 2013/14 season, the result of poor production and excessive exports in previous seasons. Given that most Argentine wheat is destined for Brazil (which is traditionally one of the world's largest wheat importers), the increase in exports, combined with an improved domestic crop, means that Brazilian food price inflation could help limit domestic food price inflation in the coming months.

More Room For Improvement
Brazil & Argentina - Combined Wheat Production ('000 tonnes)

Upside Risks To Latin American Wheat Production

We see upside risks to our wheat production forecasts for both Argentina and Brazil for the upcoming 2014/15 harvest, as high prices encourage plantings. Compared with soybean and corn, wheat production is much lower in South America, but can still have a significant impact on regional food price inflation dynamics and the global wheat market. The improvement in production bolsters our view that the global wheat market will remain in surplus for the 2014/15 season, and we continue to forecast prices to average below spot levels.

We are forecasting an increase in the combined Brazil and Argentina wheat crop for the 2014/15 season, as high prices are encouraging plantings, and soil conditions in key growing areas are improving. In Brazil, we are forecasting a mild improvement to 4.8mn tonnes, but recent government estimates put the crop at 6.7mn tonnes, making it one of the largest ever. Paraná, one of the top wheat growing states, is expected to see a production increase of almost 25% according to local estimates. In Argentina, we are forecasting production to rebound to 12.1mn tonnes, largely due to better weather. Wheat production in Argentina could increase further as local sources hint that the government would waive its 23% export tax.

More Room For Improvement
Brazil & Argentina - Combined Wheat Production ('000 tonnes)

The improved production from Argentina should help the country recover from a 40-year low in exports for the 2013/14 season, the result of poor production and excessive exports in previous seasons. Given that most Argentine wheat is destined for Brazil (which is traditionally one of the world's largest wheat importers), the increase in exports, combined with an improved domestic crop, means that Brazilian food price inflation could help limit domestic food price inflation in the coming months.

Globally, although Argentina remains a relatively prominent wheat exporter (as it is one of only two major Southern hemisphere exporters), we do not expect the country to return to its position as one of the world's leading exporters. Overall, we forecast the global wheat market to remain in a mild surplus for the 2014/15 season, and expect prices to average below spot levels for 2014 at USc610/bushel.

ARGENTINA, BRAZIL Wheat Production & Consumption
2013 2014f 2015f 2016f 2017f 2018f
Argentina
Wheat Production, '000 tonnes 1 9,300.0 11,000.0 12,100.0 12,705.0 13,340.2 14,007.3
Wheat Consumption, '000 tonnes 1 6,200.0 6,212.4 6,300.2 6,365.5 6,407.2 6,424.9
Brazil
Wheat Production, '000 tonnes 2 4,300.0 4,750.0 4,868.8 4,995.3 5,120.2 5,253.3
Wheat Consumption, '000 tonnes 3 10,864.0 e 11,407.2 11,529.3 11,660.1 11,799.8 11,948.7
Notes: e BMI estimates. f BMI forecasts. Sources: 1 USDA; 2 IBGE, USDA; 3 FAPRI, USDA.
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